Agency Problem

In March of 2014 McDonald’s employees in California, Michigan and New York sued against the company and many franchise owners, stating that they illegally underpaid employees by erasing hours from their timecards, not paying the overtime that had been worked, and ordering them to work off the clock. In two lawsuits filed in Michigan against the giant fast food chain McDonalds and two Detroit franchise owners, employees said that their restaurants gave orders to show up early to work, commanded them to wait an hour or two to start working, without being paid, until the restaurant got busy with customers. A McDonald’s employee in Detroit, Sharnell Grandberry said, “Our wages are already at rock bottom. It is time for McDonald’s to stop skirting the law to pad profits. We need to get paid for the hours we work.” A spokeswoman for McDonalds released a statement: “McDonald’s and our independent owner-operators share a concern and commitment to the well-being and fair treatment of all people who work in McDonald’s restaurants. We are currently reviewing the allegations in the lawsuit. McDonald’s and our independent franchisees are committed to undertaking a comprehensive investigation of the allegations and will take any necessary actions as they apply to our respective organizations.” In California, three lawsuits filed by workers claimed that the McDonald’s employing them did not pay them for all hours being worked, scratched hours from the pay records and denied them required food/rest breaks. Most McDonald’s franchisees use software provided by the company that shows employee-to-sales ratios and tells restaurants to cut staffing when the sales have dropped below a certain range at any hour. This has agency problem written all over it. Maybe not so much along the lines of managers acting for the best interest of shareholders but definitely managers acting in their own interests and not in the employee’s best interests. This agency problem is arising from the